Homeowner's insurance provides coverage for your house and contents. In states like Texas, homeowner's coverage starts high and goes higher. Texas had the highest homeowner's insurance in the nation in 2010, according to Shawn Nordstrom in a November 2010 article at Live Insurance News. States regulate homeowner's insurance, approving the policy language and rates. One solution to rate increases suggested by Forbes.com and similar money-management websites is to shop around for your homeowner's coverage. High price does not necessarily give you better insurance.

Type of Policy

o Homeowner's insurance comes in three basic types. HO-1 is too basic, and some states and companies no longer use the form. It covers 11 items or perils and no others. HO-2 includes the 11 basic perils and 6 more for a total of 17 perils. HO-3 provides better coverage for the home and contents and is more expensive than the HO-2. HO-3 covers 17 perils and any others it does not specifically exclude. Exclusions might include flood, earthquake, war and nuclear accident. Some states use variants of these numbers, with form policies approved by the state insurance commission. The more inclusive the policy, the more it costs.

Risk Factors

o Your homeowner's policy costs will go up based on certain risk factors. Premium calculations are based on location, sometimes down to the county or city, and the distance from a fire hydrant. So, if those risk factors changed in the past year, you could see a premium hike. The Federal Trade Commission reports that auto and homeowner's insurers use credit scores for determining insurance costs too, because better credit scores represent more stability and less risk, according to Realtor.com. If your credit scores have decreased, your homeowner's insurance premium may increase.

Inflation and Replacement Costs

o Most policies increase the policy limits based on inflation rates. Your premium cost goes up each year, but so do your coverage limits. If you have a replacement cost insurance policy instead of actual cash value, premiums will increase with the cost of construction materials. Actual cash value considers depreciation and age of the home and contents; replacement cost considers only the cost of replacing the item in today's market.

C.L.U.E.

o The Comprehensive Loss Underwriting Exchange database retains records of information about any claims you make and sometimes even your telephone calls to your agent asking about a claim. Homeowner's insurers use C.L.U.E. reports for your claims history to evaluate your likelihood of making a claim. If you have made a claim in the last seven years, C.L.U.E. has it in the database, and the insurer rates your policy premium based on the report. A recent claim will cause your homeowner's insurance to increase.

Action

o If your premium increased, and you don't know why, your insurer may have requested and received a rate increase from your state of residence. Check with your state insurance commission online, or call the office, to see if your insurer has an approved rate increase. Also, compare your policy with last year's insurance for additional coverage limits. Increased limits may explain part of the increase. If you're still not sure, call your insurer and ask why your premium increased, and if you are not satisfied, you may want to begin shopping for other coverage. Call our office and request a quote in writing to compare prices. Review policy terms and check with your state insurance office for tips for purchasing homeowner's insurance in your state.

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